The legal press has reported that the government proposes to dramatically increase the fees payable to the Probate Registry on an application for a Grant of Probate (where there is a Will) and a Grant of Letters of Administration (if there is not a Will).
If the new fees are approved, executors that are appointed in a Will and administrators who act if the deceased died intestate (both referred to as 'personal representatives') could be required to source funds to pay fees of up to £20,000.
It is expected these changes will come into effect in May 2017, although this is still subject to parliamentary approval. While most opinion suggests such approval will be a formality, it is still possible that a last minute reversal or modification to proposals might yet be made. The conclusion of many informed sources is however that these changes are a 'done deal'. So, what impact might they have?
Proposed fee scales
A Grant is usually required to prove the personal representatives' authority to administer an individual's estate following their death. The Grant is needed to sell or transfer the deceased's home and other property, deal with the deceased's investments, and cash in savings prior to making distributions to the beneficiaries. In more complex estates it is sometimes necessary to obtain more than one Grant, each covering defined asset sectors.
The fee payable at present on application for any Grant, irrespective of the value of the estate, is £155 when applying via a solicitor or £215 for a personal application. If the proposals are approved the increased fee will be based on a scale, which is assessed against the value of the deceased's estate, as set out below:
Value of estate (before inheritance tax)
|Up to £50,000 or exempt from requiring a grant of probate||£0|
|Exceeds £50,000 but does not exceed £300,000||£300|
|Exceeds £300,000 but does not exceed £500,000||£1,000|
|Exceeds £500,000 but does not exceed £1m||£4,000|
|Exceeds £1m but does not exceed £1.6m||£8,000|
|Exceeds £1.6m but does not exceed £2m||£12,000|
While this results in a reduction in fees for those estates between £5,000 and £50,000, estates of this value rarely require a grant of probate in any event.
As can be seen from the table above, this amounts to an increase of over 12,000% for estates valued in excess of £2m.
When will the fee be payable?
The fee is payable on an application for a Grant whether or not Inheritance Tax (IHT) is payable. IHT is often only paid on the death of the second individual in a marriage or civil partnership, whereas the Grant application fee(s) will be payable from the estate of both individuals. The fee is therefore likely to be payable twice for the same assets held by any couple, even when leaving assets to each other on the first death.
The estates of a couple with a combined estate in excess of £2 million are likely to be charged fees for the application for Grants of up to £40,000. If an estate is subject to IHT the fee will be payable in addition to the IHT liability.
How will the fee be paid and how will it affect my family?
The fee must paid upon submission of the application for the Grant - which is required to be able to dispose of most assets in an estate. It is not unusual, even among higher net worth individuals, for most of the value of the estate to be tied up in assets which cannot be easily accessed before the Grant has been obtained.
An increasing number of personal representatives may be forced to use their own personal funds or to take out a commercial loan in order to fund the required fee. This may slow the estate administration while the loan is applied for and there may be additional financial cost in the form of a premium and / or interest charged on any loan that is required.
Where there are no liquid funds available to pay the fee, it may in limited circumstances be possible to apply to the Probate Registry for a limited Grant. A limited Grant will authorised the personal representatives to sell a specified list of assets in the estate for the sole purpose of paying the fees, but the application for a full Grant would still be required at a later date. It is not yet clear whether the full fee would then be payable twice.
What can personal representatives do to avoid paying the increased fee?
The relevant date for determining the fee is the date on which the Probate Registry receive the completed application for the Grant. Personal representatives will likely avoid having to pay the increased fees if they act quickly to file their application as soon as possible, and before May 2017.
Once the new fee structure is brought in, there will be nothing that personal representatives can do to minimise or avoid paying the fee.
Shoosmiths Wealth Protection department offers a fast and efficient service to assist personal representatives in making an application for a Grant. Please contact us for further information.
Can I do anything now to reduce the impact of these fees on my estate?
The fee is calculated with reference to the value of the assets passing under the Grant. Any asset held in joint names with another person, or transferred into trust in your lifetime, will not form part of the value used to assess the fee scale applicable.
Individuals may also like to consider reviewing the structure of their estate(s) in order to ensure that they have sufficient liquid funds available to pay the fee and to avoid their personal representatives having to resort to a loan. This might take the form of retaining sufficient cash in bank or building society accounts, or by considering a life assurance policy written in trust outside of the estate which can be paid to the personal representatives before the application for the Grant is made.
We recommend that all individuals seek independent legal and financial advice before transferring assets into joint names and before considering large gifts to third parties or into trust, as such gifts are likely to have taxation and other consequences, and these should be carefully weighed against the benefit of any fee reduction. Please contact a member of our Wealth Protection department for further information and advice.